The next few posts are going to talk about scaling your sales operations as you move out of the evangelical phase.

In the early days of selling it can sometimes be an advantage to not have rigid pricing schedules, complex service level agreements (SLAs), hard-and-fast rate limits, etc. In each sales situation your goal as the leadership of the company is listening to feedback, calculating the customer ROI, testing what prices people are willing to pay, learning where budgets will come from, etc.

But what happened to me and what I think happens to others is that this tacit knowledge of how to sell your company’s products is not as institutionalized as you think. The people that are in the same office as the leadership team, many of whom have been there since the “early days” intuitively know how to position the company and how to sell its products. In fact, many of these people can adjust the company presentations on the fly as you roll out new product features or can reposition versus the competition as they get feedback from customer losses.

As your company develops multiple offices, hires a larger number of sales people or increases product complexity over time this kind of tacit knowledge doesn’t scale. The new hires that you pick up will use your same sales decks created by marketing but will have less impact and you often don’t realize it’s happening. Or the sales decks will all be customized by your “feet on the street” and won’t resemble the way you THINK your company is being positioned.

I know all of this, like most everything I learned about startups, from making mistakes at my first company. We had 4 or 5 sales reps that had been around since the early days. We then brought the number up to 8-10 and even hired an SVP of global sales & marketing. Because he was a big company sales exec he was very critical of some of the missing tools at my company. He pushed for a lot more standardization of pricing, marketing collateral, sales process, etc.

He told me, “There’s no standardized way for me to onboard new people. There’s no way for us to easily rollout changes to pricing, positioning relative to competitors or new sales tools. We need more standardized tools if we’re going to “arm” our sales teams with the tools they need to effectively do their jobs and we need to better “aim” them at the right opportunities.

Ultimately he & I had a bad cultural fit. I was stuck in startup culture and he was stuck in big company culture and their was a chasm between us that couldn’t be rectified. But the truth is that he was right about the need to for us to change as we grew and I think this happens at a lot of startups. Like I did, they get stuck in this middle ground where process & tools become more important.

Be realistic about your skills. I’m not (and never will be) a good process manager because I’m not process driven myself. I had to surround myself with trusted people who were great at process.

I’m going to take a few posts to talk about some of the scaling issues. In this post I’m going to talk about “aiming,” or segmenting your deals into A’s, B’s & C’s.

A’s, B’s & C’s

As a very early-stage startup person you’re used to rigorous prioritization. You have no choice since in the first few years everything you do is about showing results to justify financing to continue your operations.

I would work through my sales deals pipelines by doing pipeline reviews. In order for a deal to be forecast in the current quarter you had to have a champion, identified a budget holder with money to spend, presented the customer with an ROI (return on investment) calculation of the benefit of using our product and the customer had to be in an active review of choosing a supplier of document & collaboration services (the product we offered).

You could often tell when a sales person couldn’t defend having the deal be listed as an A deal (and thus have a high forecast percentage) by having them walk you through each deal. When I got busy and only had time to review spreadsheets or output from Salesforce.com it was impossible to know which deals were “real.” The reason, as I learned, is that many sales people like to take meetings with customers who are willing to meet them and give all the right messages. Butmany of these people they’re meeting with areNINAs (no influence, no authority) – and thus not qualified.

Inexperienced sales people will spend too much time with people that are nice to them and talk a good game about being interested in your products but who don’t have the budgets. I learned this the hard way. Either we’d have deals that seemed “stuck” (were in the “closing within 3 months” pipeline for 9 months) or we’d have sales reps who constantly kept adding new deals and taking out the old “sure deals” that didn’t close.

The most experienced sales reps were the ones who knew that the three most important things to do with a sales lead were to qualify, qualify, qualify. Lead quality matters because the scarcest resource of a sales rep is actually time. The reality is that no matter how much you want to sell your products, you can’t push them on a customer who isn’t ready to buy. They might have other initiatives, budget constraints or just need more time to evaluate your space. As the best sales leaders will tell you, “you have to align a company’s sales cycle with a prospects buying cycle.”

This is where management has to step in and help with “aiming.” Ultimately as you grow this task can be shared between a VP of Sales, VP Marketing and the CEO. I define “A deals” as those that have a realistic shot of closing in the next 3 months, “B deals” as those that you forecast to close within 3-12 months and “C deals” as those that are currently unlikely to close within the next 12 months.

“A deals” should get much of the sales person’s time (say 66-75% of time), “B deals” should get the balance as each sales rep needs to build their pipeline and bigger deals take time. And the key to scaling is that “C deals” should get no time from sales. They should be owned by marketing.

The role of marketing in managing pipelines is to do two things 1) fill the top end of the funnel with new “qualified” leads (e.g. converted from “suspects” to “prospects”) and 2) managing “C deals.” Today’s C deals are obviously tomorrow’s A’s & B’s.

So the best run companies have marketing running activities to nurture their C deals. Examples activities:

Newsletters – one of the goals of newsletters is to keep your company & its products on the consciousness of your “suspects” or future buyers. C deals go in the newsletter bucket and should be identified as C newsletter companies. The things you send them should be different than the newsletters you send to existing customers, for example

Customer Events – It is far easier to get potential customers interested in your products when they hear actual customers talking about your products and how they are using them. Suspects & prospects are often in search of success stories from their peers to hear how they’re improving internal operations. So one of the smartest things we did at Salesforce.com was run “city tours” which were basically our existing customers standing up and talking about how they were using our products plus our product management teams talking about future innovation / development. Customer events are a great way to market to your C deals so that you keep them informed and try to raise their interest levels

PR – Some companies are excellent at PR and others don’t put much effort into it at all. I think PR is an incredibly important activity for technology companies and most companies aren’t very good at it. I wrote a bit about how to better manage journalist relations in this post. The reason many companies don’t put enough effort into PR is that PR doesn’t have an immediate translation into sales because it’s most a “C deal” activity.

Analyst Relations – In many technology fields analysts are hugely influential in determining enterprise budgets. I sometimes find it funny since 73.6% of all statistics are made up, but the truth is that many analysts are great and help customers frame the decisions they need to reach. Spending time with analysts getting into their “innovator quadrants” will help you manage your C deals and pull them forward to B’s & A’s. This is obviously a marketing & CEO activity.

I'm glad to see that we've organically reached these conclusions, at least with the A-lead focus by our sales team, and using newsletters, customer events for C's.

Still working on the PR and Analyst Relations though…

http://www.darrenherman.com dherman76

Mark, great thoughts. Love it.

One of the things I'd love to see you focus on is the difference between a CEO who grows up on product side (and tech) vs. someone who grows up on the sales side. They manage very differently and would love to see you highlight this in future posts.

All the best,Darren

gregg

typo in 3rd paragraph 'you goal'…feel free to delete this.

ldmangin

Hi Mark -

Good sales structure, both in terms of thought process and execution. It really brings home how marketing and sales need to work together to drive an overall pipeline. One question which would be interesting to see addressed in later posts is how to balance the investment between the two (sales vs. marketing).

There are obviously a myriad of factors that play into how the sales & marketing structure is built: price of the product, revenue per client (one time vs. ongoing), length of sales cycle, type of client, type of sales process used (i.e. elephant hunters vs. telesales team) and i'm sure many others. The biggest determining factor seems to be the revenue per client first and foremost yes?

Not sure if folks that are too consumery will get this series — but I think this may be the most valuable one you post, as much of it is both counter-intuitive to folks that haven't done it before, and will be in contrast and likely conflict with advice others give them who also lack on-point experience (including likely many of their investors).

http://twitter.com/GeorgeKnox George Knox

Mark

Really great blog and agree entirely that it is all about building the pipeline but being razor sharp on the qualification. Qualification can sometimes be seen as a confrontational situation as you have to be quite ruthless in getting the prospect to be clear about the buying process and at the same time keep a cordial relationship. This in my experience does not always sit comfortably with all personality types and over the last 5 years added some personality profiling into the recruitment test.Unfortunately, some of the salespeople are more account managers and expect the prospect to “award” them with an order because they have run about giving them proposals and info and been generally nice. If only sales was that simple !Again in my experience you will need different sales personalities in a start up vs a more established mature company.

To sum it up, I think the best salespeople should be great business people

Great blog

George Knox

ldmangin

Cool – its definitely an interesting question, both broadly (in terms of the inter operations of all groups within the company), as well specifically when considering how to build the funnel that will lead to revenue for the business.

In terms of picking between marketing and sales, I've been told there are two 'magic' numbers: if you're selling something where individual clients are worth $200k or more, the sales people are a no brainer with marketing used to qualify and funnel leads. If you're selling something where individual clients are worth $1k or less, then marketing alone is the only option drive awareness and adoption, with a more heavy focus on account management then active closing if there is an ongoing element. The somewhere in between is where you need to be good at juggling.

http://www.nabbr.com MattMinoff

What were 3 of the most important things you did to effectively learn how to manage the sales process?

http://bothsidesofthetable.com msuster

1. hired an outside coach2. hired an experienced team & took advice from them on shaping the process3. See 1 & 2

http://bothsidesofthetable.com msuster

This seems arbitrary to me. My rule:

Less than $7,500 then it must be customer self service$7,500-$75,000 telesales$75k+ outside sales

All require marketing to fill the top end of the funnel.

http://bothsidesofthetable.com msuster

I have a different mnemonic, but I'm saving it. Will publish soon.

http://bothsidesofthetable.com msuster

Yeah, I thought about that. I wondering whether too business vs. consumer but decided to publish anyway. Hopefully of value to enough people.

http://bothsidesofthetable.com msuster

thanks, George. “order takers” are at mature companies. It doesn't work well in startups. That's why I don't look to hire people at startups to run sales if they were ONLY at companies during the “order taker years.” Appreciate your input.

ldmangin

I like that breakdown, makes sense – Thank you.

Susan Walter Sink

I found a couple of really excellent points here based on my experience with several start ups: First, the early stage employees, especially in sales/mkt have a very different job/perspective on the customer. Their personalities are built on looking at the future (only a small percentage of people think this way) and they are generally flexible in designing a deal that sells the customer. As you add sales people and structure, the personalities and methods used to sell and mkt change. They have to. So entrepreneurs need to understand that the feel of the company may change as a result. Navigating this is really difficult and that's where I found good Investors are helpful in engaging dialog and training so the company continues to move forward.

Relative to sales: I once hired a sales rep who constantly reminded me that he was in the business of dis-qualifying people that wasted his valuable time – the single commodity he could not replace. He focused on the deals he felt would close. While you have to be careful in this situation that the deals are the ones you want, his sense of responsibility to making payroll for an entire company was personally high. But you might need to learn to balance that drive in a rep with a balanced look at the structures of the deal.

I would also submit that the best pay plans I ever saw work well had commissions for sales, marketing and engineers associated with each deal and relative bonuses set for the company quarterly for everyone. It still takes a team to close a deal and if you have a sales rep that is engaging the right prospects.

http://www.gordonbowman.com Gordon Bowman

“Lead quality matters because the scarcest resource of a sales rep is actually time. “

Good point. Most of what makes a good sales rep boils down to time management. “What opportunities am I really spending my time on?” is a question sales reps should constantly ask of themselves. And with your A’s, B’s, & C’s framework in mind.

Mark Suster is a 2x entrepreneur turned VC. He joined Upfront Ventures in 2007 as a General Partner after selling his company to Salesforce.com.